Stable revenues, a strong EBITDA contribution and a significantly improved net result
Volumes in the previous year’s period profited strongly from pull-forward effects, driven by unusually mild weather in Europe. ‘Such exceptionally high volume levels are obviously difficult to repeat. However, through our successful ‘Top Line Growth’ (TLG) programme we have managed to limit the volume decline in the first quarter to such an extent that – together with acquisitions and positive currency effects – we have even grown the business slightly’, Pepyn Dinandt, CEO of Braas Monier Building Group explains. ‘At the same time, positive pricing and an on-going focus on cost management compensated for cost inflation. Operating EBITDA was thus close to the high level of the previous year’s quarter, the net result for the period even exceeded 2014 numbers. The strong operating performance and the effective execution on TLG have made the first three months a promising start into the year 2015 for Braas Monier.’
Three-month revenues slightly higher year on year
From January to March, Braas Monier increased revenues slightly by 0.4% from EUR 250.0 million in 2014 to EUR 251.1 million in 2015. On a like-for-like basis, i.e. excluding currency effects as well as scope expansions and acquisitions – revenues declined by 4.4%. Positive pricing, additional revenues following the first time inclusion of Cobert and favourable currency effects thus offset volume declines in the existing tiles, components and chimney businesses. While the high comparable basis of Q1 2014 was not reached in Germany and France in particular, other countries such as the United Kingdom and the Netherlands continued to grow the underlying business sizeably. In Asia & Africa, where no adverse weather patterns distort the quarter-on-quarter comparison, revenues increased by 20.0% (5.8% on a like-for-like basis), driven by strong growth in Malaysia and South Africa.
High operating leverage for future volume growth protected
Operating EBITDA in the first quarter 2015 reached EUR 17.1 million (Q1 2014: EUR 20.7 million). The moderate decline of EUR 3.6 million is directly related to lower volumes sold in the tiles, components and chimney businesses. Inflation in variable and fixed cost was compensated for by positive pricing as well as individual measures to increase efficiencies and to reduce costs. ‘It is important to continue to focus on strict management of costs. We successfully did so in the first quarter 2015. Any anticipated volume growth in the upcoming months will thus strongly contribute to our EBITDA growth’, adds Matthew Russell, CFO of Braas Monier Building Group.
Net result for the period further improved
The seasonally typical negative result for the period from January to March was further reduced in 2015. With EUR -7.3 million, it improved by 53.0% over the previous year’s figure
(EUR -15.6 million), thus an improvement of EUR 0.21 per share outstanding. Lower interest expenses following the refinancing in April 2014 and positive one-time effects resulting from the acquisition of Cobert over-compensated the moderate decline in Operating EBITDA.
Equity position strengthened, lower interest expenses expected
As a result of the positive earnings contribution during the last 12 months and the capital increase of approximately EUR 100 million in connection with the IPO in June 2014, total equity rose from
EUR 0.0 million at the end of Q1 2014 to EUR 73.9 million at 31 March 2015. The leverage ratio, defined as net debt to Operating EBITDA (LTM), was reduced significantly to 2.4 times at the end of the first quarter 2015 (Q1 2014: 2.8 times).
The Company’s Term Loan B (EUR 200 million) as well as its Revolving Credit Facility (EUR 100 million, undrawn as at 31 March 2015) contain ratchets directly related to the leverage ratio, becoming effective in April 2015. Based on the current leverage ratio, the Group is to benefit from a margin step-down of 50 basis points in both instruments, accounting for annualised savings on interest expenses of approximately EUR 1 million.
2015 volumes in the pitched roof markets expected to improve over 2014
For 2015, Braas Monier expects further strong growth for the United Kingdom and moderate growth in other European countries, such as Spain and Portugal, the Netherlands, Poland, Hungary and Turkey. A stable development is anticipated for Germany, Austria and also Italy, where the market should have reached its trough. France is expected to further decline, albeit at a much lower rate than in 2014, before reaching its low point in 2015. In the emerging markets, growth is foreseen especially in Indonesia and South Africa. The components business is expected to show a good improvement in performance supported by rising national and international building standards, especially in regards to energy efficiency and safety. With regard to the Chimney & Energy Systems business, expectations are for a similar development to the roofing business in the respective markets.
Braas Monier will continue to strive for above-market growth by rolling out further initiatives under its ‘Top Line Growth’ programme to existing and new countries. Through the acquisition of Spanish and Portuguese market leading Cobert, Braas Monier has entered new growth markets which will generate additional revenues and earnings. The transaction was closed in January 2015. For the current fiscal year, management expects the Iberian businesses to generate revenues of approximately EUR 38 million and contribute approximately EUR 5 million to Operating EBITDA (including synergies).
Based on these assumptions, Braas Monier expects revenues to grow at least by a mid-single-digit percentage figure, driven by growth in volumes and the first time inclusion of Cobert. Average selling price increases are expected to at least offset variable cost inflation.
From a cost perspective, management expects slight increases in input costs (raw materials and wage inflation). The currently low energy prices might have the potential to ease some variable cost inflation if they were to stay at these levels throughout the year. Revenue growth together with an on-going focus on strict cost control at all levels will further drive growth in the Company’s profits.
Acquisition of Golden Clay Industries (GCI), leader in clay tiles in Malaysia
In April 2015, Braas Monier signed an agreement to acquire Golden Clay Industries Sdn Bhd (GCI), leader in Malaysia for manufacturing and supplying clay roof tiles and fittings and being one of only a few manufacturers in the Asia-Pacific region using modern H-cassette technology. For 2014, GCI reported1 revenues of MYR 35.0 million and an EBITDA of MYR 8.5 million, on a pro-forma basis. Including synergies, Management believes GCI will increase revenues in the medium term to more than MYR 55 million and EBITDA to at least MYR 21 million, leading to a strong cash flow profile. The acquisition will be financed from free cash flow and is expected to close latest in October 2015. On the basis of GCIs current planning and assuming a closing of the transaction to occur in October 2015, revenue and EBITDA contribution would be expected to be approximately MYR 6 million and MYR 1.7 million, respectively, for 2015.
1 Unaudited figures